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LuLaRoe in $1B lawsuit for shady business model

(BUSINESS NEWS) LuLaRoe has landed in the middle of a $1 billion lawsuit with the basis being how the company is structured.

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Multi-level marketing brands may be a quick way to make a buck for some people, but for others it may spell financial ruin.

On Monday, October 23rd, former distributors for multi-level marketing legging and athleisure brand LuLaRoe are filing suit against the company. These distributors, called “Retailers” by LuLaRoe, accuse the company of being a pyramid scheme, as defined by California law.

The 1 billion dollar suit federal class action suit, filed by three plaintiffs, seeks damages for incurring at least $20,000 dollars of debt upon its sales consultants. 80,000 of those consultants paid up front for their inventory. LuLaRoe denies all charges.

“We have not been served with the recent complaints, but from what we have seen in media reports, the allegations are baseless, factually inaccurate and misinformed,” a statement made by the company said, “We will vigorously defend against them and are confident we will prevail.”

In the brief attached to the filing, former retailers claimed that they were strongly encouraged to keep up to “$20,000 worth of inventory on hand” including “10 items in every size and style.”

The process of having new retailers consistently on the bottom of the company’s hierarchy, unable to reach higher levels and turn a profit is why the suit claims LuLaRoe’s status as a pyramid scheme.

Investigations into lawsuits of this sort are examined by the Federal Trade Commission (FTC). In a ruling in early last year, the FTC awarded damages of $200 million dollars to distributors participating in vitamin and supplement company Herbalife’s multi-level marketing business deals.

Essentially, the settlement for the 2016 Herbalife suit stated that there were two key standards for a multi-level marketing company that wants the all clear from the FTC.

First, consultants must get incentives from selling product to consumers, not just recruiting more sellers. Second, a multi-level marketer has to tell the truth about the return on investment that a consultant can receive selling the product.

According to the suit against LuLaRoe, the suit stated that one someone decided to become a consultant, “they were pressured to invest and reinvest by purchasing the Defendants’’ clothing products — regardless of whether they were able to sell the inventory.”

LuLaRoe also claimed that individual sellers could “earn full-time pay for part time work.”

In light of the suit, LuLaRoe’s website, which has subsections for “happiness,” “social responsibility,” and “making good” seems a little ironic now.

Alexandra Bohannon has a Master of Public Administration degree from University of Oklahoma with a concentration in public policy. She is currently based in Oklahoma City, working as a freelance filmmaker, writer, and podcaster. Alexandra loves playing Dungeons and Dragons and is a diehard Trekkie.

Business News

Plant-based milk company Oatly is going public in the U.S.

(BUSINESS NEWS) With the growing popularity of plant-based goods, it is unsurprising to see Oatly going to market, but how much the investment pays off remains to be seen.

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Plant-based milk Oatly on store shelves, two different varieties.

On Tuesday, the plant-based milk company, Oatly, filed for an initial public offering (IPO) in the U.S., which could value the company between $5 billion and $10 billion.

The IPO will take place after the United States Securities and Exchange Commission (SEC) completes its review process and is subject to market conditions. Additional details of the planned sale were not offered in the confidential filing. The price and number of shares available to purchase are yet to be determined.

The Sweden-based vegan food and drink maker was founded in the 1990s by brothers Rickard and Björn Öste. The company sells its products online and in more than 50,000 retail stores in 20 countries across Europe and Asia. The company entered the U.S. in 2017 and has also partnered with cafes, such as Starbucks.

Last July, Oatly raised $200 million in investment equity. The company is backed by former Starbucks CEO Howard Schultz and celebrity investors like Oprah Winfrey, Natalie Portman, and Jay-Z. According to PitchBook, the company was valued at around $2 billion at that time.

In 2019, the company generated about $200 million in revenue, which is almost double the year before. Figures for 2020 haven’t been released yet, but the company planned on doubling them again.

Although the numbers haven’t been made public, it isn’t a far-off stretch to say the company could have done just that. Demand for plant-based products has been high. In just the first week of March last year, Nielsen statistics showed the sales of oat milk were up 347.3%.

This rise is due to consumers seeking alternatives to animal products and healthier food options. Already, fast-food chains, casual, and upscale restaurants have entered the plant-based food sector by adding new plant-based items to their menus.

Burger King has its Impossible Whopper with a plant-based patty. Baskin-Robbins offers three vegan ice cream flavors. Starbucks also announced in December that it would now serve oat milk at all its locations nationwide starting in the spring.

Oatly already has a large following. As more health and environment-conscious consumers are willing to seek and pay for these types of products, it seems like their following will only continue to grow.

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Business News

Fake news? Well, what about fake reviews?

(BUSINESS NEWS) Amazon is swamped with fake reviews, making it harder than ever to trust whether or not a product is legit. How can you spot them and avoid falling victim to this shady practice?

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Person shopping online with credit card, but are they reading fake reviews?

These days, most of us have turned to online shopping in lieu of brick-and-mortar establishments to get our favorite items shipped directly to our front door. With many retailers still closed, and many more of us understandably wary of exposing ourselves to the risk of COVID-19, it’s easier to just click “buy” and then spend the next two days with our noses pressed to our windows in anticipation of the arrival of our new toy or garment. But are we at risk of being tricked by fake reviews?

If you’re like most people, you probably depend on product reviews to make a purchasing decision. Honestly, it’s perfectly reasonable to see what others thought of the item before you buy it. These online reviews are almost like your neighbor, who whipped out his lawnmower and bragged how it goes from 0 to 4 mph in less than thirty seconds. Obviously — obviously — you had to run out to your nearest garden center to pick up one of your own after his glowing review of it, right?

That’s kinda like online reviews, too. You can’t just knock on the purchaser’s door and ask them what they thought of it, which is why you carefully peruse those reviews and weigh those pros and cons. Okay, this shirt fits loose. Fine, these kitchen shears broke after three uses. Whoa, this brand of potato chips puts hair on your chest…? Sweet! And you also probably looked at those 3-star reviews, too, to see what was merely “meh” about the product. With this assortment of mixed reviews, you can be confident that you’re making a rock-solid choice.

Uh, sadly, nope.

Unfortunately, Amazon (as well as other major retailers, such as Walmart) are often fraught with a glut of fake reviews. In fact, there are numerous Facebook pages dedicated to the purchase of these reviews, and many of the reviewers are compensated with a monetary reward (usually the cost of the item, plus a few extra dollars for their work) for posting the glowing 5-star rave.

So what can you do to help protect yourself for falling for these seemingly harmless lies?

Well, first and foremost — a fake review isn’t necessarily harmless. If a defective or dangerous product is boosted by a false review, it can seriously harm you. Sure, there’s a good chance the fake reviews are benign, and the worst you’ll be in for it is losing a few bucks on a crap item. But if something is using counterfeit or unsafe ingredients (such as minoxidil in potato chips because, real talk, chips aren’t supposed to put hair on your chest), then yes, you need to be informed of it so you can make an educated decision about whether or not that item is coming home with you.

So, the question remains: How can you, intrepid shopper extraordinaire, avoid purchasing a lemon? (Unless, of course, your goal was to buy an actual lemon in the first place. Margaritas, anyone?) The good news is that there are a couple things you can do. For starters, common sense goes a long way. Do the reviews offer any context, or is it just line after line of, “Loved it!” without any actual feedback on the item? That’s why those 3-star reviews are so priceless. Usually the reviewer actually used the item and had a valid reason for their tepid review, allowing you to make an educated decision about it.

Finally, there are a couple of websites you can use to help you out. First, there’s Fakespot. This web extension will cull out all the fake reviews, allowing you to see at-a-glance the remaining genuine reviews. It then reviews the item for its credibility, letting you know if the seller was trying to pull a fast one on you. Then there’s ReviewMeta. Unlike Fakespot, this website goes through the views and instead of grading the seller, it actually grades the item based on the average score of the remaining real reviews. And by using both of these websites together to check those reviews? You’ve now got yourself a pretty decent idea if the product is actually worth your hard-earned dollars.

It’s far too easy to get scammed these days. However, by staying alert and remaining mindful about your online purchases (and avoiding the temptation to give into those stress-motivated impulse buys), you can avoid being bilked, too. And hey, instead of looking at online reviews, maybe you should go back to the old-fashioned way of doing it: By asking your neighbor for their opinions of items. Just, y’know, do it from at least six feet away, while wearing a face mask.

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Business News

Manufacturing is bouncing back, but supply of materials is struggling

(BUSINESS NEWS) As manufacturing demands surge, so do material costs. The pandemic has shifted where we’re putting our money, but supply is struggling to keep up.

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Manufacturing worker sealing a large pipe together.

As the United States’ manufacturing process comes back up to speed, a surge in demand is creating a shortage of the one thing manufacturers need in order to do their jobs: Supply.

Fox Business reports that, due to a much quicker return to normalcy for manufacturing than some expected, a price hike for materials is affecting everyone from the bottom up: “Prices for steel, aluminum, lumber and other materials are rising in response to higher order volumes. Commodity supply chains are now clogged with orders, causing some producers to add weekend hours and overtime for employees.”

The fast manufacturing rebound seems to be a harbinger of better days ahead, but this supply bottleneck could dampen producers’ resolve.

It should be noted that the spike in demand for goods which use the materials in question isn’t an entire surprise. As Fox notes, much less of consumer money has been going toward travel and dining out. This has resulted in more money flowing into things like appliances, vehicles, and entertainment commodities.

But the toll is hitting producers coming and going as things like depressed oil and the paper used in packaging undergo substantial price hikes, leading some companies to stockpile resources in hopes of having an edge in the future.

Others find themselves in the uncomfortable position of having to choose between lower profit margins or higher prices on manufactured productsa choice that is sure to impact consumers, if not the rate of consumption.

Indeed, some companies, such as Northwest Hardwoods, have an upper limit on the price they can charge on a finished product regardless of rising material costs.

It’s not all bad, of course. Global prices for materials like aluminum and scrap steel have gone up, which means people like Brad Serlinthe president of United Scrap Metalcan make a killing. “We can sell everything we have,” says Serlin, referencing “big orders” from recently busy steel mills.

As the pandemic wears on, though, one thing is crystal clear: The high demand for domestic goods coupled with rising global prices for materials is going to make for some severe price hikes in the coming months.

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